Posted by: Marty Fahncke | January 6, 2010

Verizon Customer Service needs a math lesson

…or perhaps it’s just me who needs a math lesson?

I know this is a bit of a long post, but if you have 2-3 minutes, I would really appreciate if you would please read on, then post your comments and let me know if I’m crazy…or if Verizon is. (Don’t worry, I’ve done all the math for you, I just need you to help me understand what Verizon Wireless is thinking!)

I tend to be a very loyal customer when I get service I like.  A couple of examples:

  • Until she retired, I used the same hair stylist for over 20 years.
  • I’ve been eating at my favorite Chinese restaurant every chance I get since 1987.
  • I’ve been a loyal Verizon Wireless customer since the day Verizon opened its doors for business in 2000, and was a loyal customer of their previous incarnation before that.

The only time I wasn’t a Verizon customer is when I moved to a rural Kansas location where they had zero service.  So for two  years I was a (not very impressed) T-Mobile customer.  However, as soon as I found out Verizon finally had service in my area, I switched back immediately.

My average bill for the eight years I was on Verizon Wireless was around $100/month.  So let’s start with the math:

$100 per month X 12 months X 8 years = $9,600 I gave to Verizon in the past.

In the many years I was a Verizon customer, I was a big evangelist for the brand.  Their unlimited mobile to mobile plan prompted me to recommend Verizon to many of my clients, customers, and even family members.  In fact, I particularly remember my dad being SOOO excited because switching his phone and his (then) girlfriends phone to Verizon saved him about $400/month in wireless costs.  (They really liked each other…they wound up getting married!)

All told, I estimate I’ve brought Verizon a minimum of 25 new customers since I’ve been their customer.  That’s a conservative estimate, but we’ll use it for now.  Continuing to be conservative, let’s say those customers averaged $50/month in billing.  More math:

25 customers X $50 per month X 12 months X 8 years = $120,000 in referred revenue I’ve brought to Verizon.  WOW!

So that’s the past.  Now let’s talk about the future.

Hand holding a BlackBerry Curve Smart Phone

I’ve continued to be happy with ALMOST every aspect of Verizon service.  I now maintain two Blackberry data plans, so my monthly bill is about $160.  Barring any drastic changes or moves, I had no plans to drop the service.  So let’s say I would have been with Verizon another 10 years and do some more math:

$160 per month X 12 months X 10 years =  $19,200

Finally, let’s assume I have the same influence in bringing them additional customers in the future.

That’s another $120,000 in future revenue.

So, here I am, a customer who is worth $28,800 in direct revenue, and $240,000 in referral revenue for a total of $268,800 lifetime value (LTV).

Here is where the confusion comes in…

Recently, the Verizon Wireless service levels (signal) at my house have deteriorated to the point that I cannot use my phone at home.  It worked fine for the first 8-9 months I was back on Verizon, but now is virtually unusable.  This is a BIG problem for a guy who works from his house.

In talking with Verizon Wireless, the said they are having “tower problems” due to their acquisition of Alltell earlier this year, and the drop in service coverage is “known” and “entirely their issue”.

Their solution?  They want to sell me a $250 device that is basically a mini cell tower that plugs into my home internet access.  Pretty cool device, and it would totally solve my problem.  “But,” I asked, “why should I have to pay for this device when the problem is admittedly yours? My service worked fine before you screwed up something in your tower.  Don’t you think you should just give me the device to fix your own problem”.

Their answer: “Nope, we don’t just give these away under any circumstance.  If you don’t want to pay for it, then we recommend you drop our service”.  WHAT??

By the way, I got this answer from both a customer service rep, AND the “Office of the President”.  So that’s their final answer…“Buh bye” to me.

So here I am, planning to drop my Verizon service as they recommended.  I’m currently researching T-Mobile and Sprint, getting ready to take my $268,800 in lifetime customer value to one of Verizon’s competitors.

But as a business person and marketing consultant, I’m completely baffled as to why a company would make a decision like this.  So this is where you come in dear reader:  Can YOU give me any logical scenario where a business would sacrifice $269,800 in revenue rather than simply take care of the customers’ needs for a measly 250 bucks?

Bags of money - Bills and coins

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Responses

  1. Easy…if they hand these out to everyone that has an issue such as yours or maybe just 1000 people that have this exact problem then they throw away all of the money that has gone into research making this solution to the problem and throw away almost all of your $269,800 revenue. Personally I think it is ridiculous that any of the carriers can charge what they do for “AIR TIME”. 🙂 Love my AT&T and all of their issues too..

    • @Ira – I agree they shouldn’t hand them out to everyone. However, if they DID give out 1,000 of them, how much revenue would they be keeping by saving each of tthose customers? Perhaps not everyone has the LTV I do because I’m a big mouth who is always pushing my opinion…but they’ve got to be at least worth several thousand dollars per customer saved, wouldn’t you think?

  2. Marty, I completely agree with you. Foolish on their part, especially when you consider that the $250 device they want you to purchase doesn’t even use their signal – thus reducing traffic on their network by redirecting you to your cable provider.

    In essence, they could keep charging you $160 a month for using EVEN LESS of their mobile phone network and services. Sounds like a win situation for them.

    But since they really don’t want your money anymore, go with a small minutes package from Sprint or T-Mobile and subsidize any additional minutes you need with a Skype account as it’s a fraction of the cost of what the cell phone providers charge.

    Just my two cents…

    • @tomjalana – Thanks for the Skype tip…I will look in to that. Have a great day!

  3. I just thought I would put my two cents in since being on the family plan with you means I am losing my Verizon Wireless service as well. After talking to these crazy people you call family, I just thought you should take into account the fact that we mainly make our cell phone decisions based on you and your carrier. In leaving Verizon, you are taking at least half a dozen of our relatives with you. It’s shocking to me that we are such sheep, but even more shocking to me that Verizon is willing to let 7 people walk away without so much as an attempt(7 being the number of people who have made the decision to not renew their contract. This is not including out of state, or those I just haven’t contacted yet.). Maybe you should do that math!

    • @Brandie – Interesting point. I had figured in the math how much my referrals TO Verizon were worth, but I had not figured how much more they will be losing because of me referring people AWAY from them. Crazy.

  4. I agree with your point entirely, and after doing some research, I learned that Verizon Wireless is investing $209 Million into the Michigan area digital network, and have already put in over $1.4 billion. Furthermore, they have installed 106 generators in the area so service works in “crisis” times, but won’t do anything about the areas that have no/little service currently.

    That being said, Verizon has over 89 Million customers, 85,000 employees, and make and annual revenue of over $58.6 Billion with an estimated 27.7% increase. With that, your total revenue is approximately .0002% of what they make, which means that without you, they get a 27.6998% increase, and one less thing they have to deal with. They don’t see you as $16,200 a year, they see you as .0002%, which is absolutely nothing to them!

    I have heard many complaints about Verizon Wireless when it comes to things like this, and from what I have heard, they are a good service provider, UNIVERSALLY, but when it comes to individual service, there is nothing!

    • @Jacob – Thanks for stopping by my blog. You’ve taken the math to an even deeper level that I did! I think you are correct, Verizon sees me as a .0002% customer. Which is a shame.

  5. Well Marty, I don’t know what AT&T is like in your area, but when I had my AT&T, I had coverage everywhere I went. For example, when your mom and all your aunts and uncle went on vacation in October, I had service where they did not, they are on Verizon.

    • Sorry Becky, but AT&T isn’t an option. You may have had good experiences with yours, but almost everyone I know with AT&T absolutely HATES their service. Unfortunately, it’s the only service you can use with an iphone, so many people are stuck if they want to use that particular (and incredibly popular) smart phone. I know literally hundreds of people who say “Love my iphone, hate AT&T!

  6. Hi

    I am a customer of Verizon in the UK. I have to say they are the worst supplier I have to deal with. I currently have 2 lines down. I called them on Monday and they cannot even see that I exist as s customer. Lets see if they recognise me as a customer when I don’t pay the next bill!

    • Phil, I have a feeling they will “find” you in their system once they realize you owe them money!

  7. Great rant!
    Ridiculously ignorant decision by Verizon, a typical network thing to do by the standards I have had whilst using the ‘Vodafone’ network in the UK.
    I had a very similar experience, though my ‘signal cut’ came within a MONTH of starting my 24 month contract, great for a month, for the following 2 years I had no signal unless I walked to the top of my street.
    When I inquired I got fobbed off with a similar excuse however I was not offered a home signal booster as it didn’t exist at the time, though a recent campaign shows that technology is now offered, but asking me, the customer, to fork out another what, £60? to do something which should already be a part of my service? pathetic.

    also @phil, Verizon doesn’t operate as a network in the UK does it? :S. Your phone probs doesn’t work because your on the wrong continent haha 🙂


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